I’m happy to say that I achieved my financial goal for my first year of making “real doctor money”: I paid off all my short-term debt and built up a few months of expenses in savings. So it’s time to start investing.
I have my 401(K) maxed out. Right now it’s going into an Aggressive Lifestyle Fund; I might be better off putting this into a regular index fund, but I haven’t compared the pros and cons.
I’ve also just joined ShareBuilder, where I plan to make a set buy every month. A big chunk of that is going into a couple of index funds; one is an index of European and Asian funds, and the other is a Russell 1000 index. (If anyone can explain the difference between a Russell 1000 “growth” and “value” index, I’d appreciate it.) (These were chosen with the help of ShareBuilder’s portfolio building tools.)
The rest I’d like to put into some individual stock buys. What are some specific things to look for? How much faith should one have in stock ratings? What are the best sources for the relative newbie (either free, or worth paying for)? (I have done a lot of reading at fool.com, which seems solid, but these days they seem awfully eager to sell me expensive newsletters.)
Please feel free to ignore my specifics and offer more general advice, so this thread might be interesting to more people than just me.
I’m not going to give specific suggestions, but you might look at Exchange Traded Funds. These funds seek to track either general indexes such as the Dow Jones Industrial Average (DIA ), the S&P 500 (SPY ), or the NASDAQ 100 (QQQQ ). There are also hundreds of more narrow funds which can track an industry such as Oil and Gas stocks.
They’re somewhat similar to mutual funds except that they trade on an exchange and can be bought and sold like stocks. Ishares and Vanguard have good information on ETFs.
Here is a description of some of the various Russell Indexes.
General advice ahead:
I think you’re doing a smart thing putting the bulk of your investment in mutual funds. I’m a big fan of index funds, I consider them the benchmark against which all other investments are evaluated. Index funds will give returns very similar to the market they index, with low overhead costs
When it comes to buying individual stocks, I think it’s silly to think you will be able to select stocks that outperform the market. Guys who get paid big bucks to do nothing all day but manage funds have trouble beating the market. You are a novice who has a real job to go to 60 hours a week, and you don’t have a team of analysts working for you.
If you choose to invest in individual stocks, do it for your own enjoyment and education. Select stocks that represent something you’re interested in, and will enjoy learning more about. Understand that you may win, you may lose, but there’s not a thing you can do in advance to ensure buying a winning stock.
You didn’t say which it was you wanted to do, invest wisely, or pick stocks. I’ll take a shot anyway.
You want to be able to get information from the largest possible pool of experts and weight their opinions according to how rich they have become. However, that is exactly what the stock market has already done in collectively setting the stock price. So, it doesn’t matter which stock you buy. They are all equally good deals.
Stay in it for the long haul. Like others note, you’re never going to outperform the market with your choices. You can, however, eliminate the cost of churning by holding your stocks for the duration of your investment lifetime.
I lied in #1 above. If you are a doctor you might have ups and downs in your career - I dunno, maybe because medical insurance laws change, maybe because the population ages, whatever. So while all stocks are equally good deals in general, in your case a stock may be preferable if it will probably move the opposite direction of your employment fortune.
One thing most market experts can’t do is notice the things your life happens to make it easy for you to see. If you use a company’s products and think they’re great, buy their stock. If a lab furniture manufacturer along your commute keeps expanding their parking lot, buy some tech stocks.